Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade

Issue 6 - Evidence - Meeting of April 9, 2008

OTTAWA, Wednesday, April 9, 2008

The Standing Senate Committee on Foreign Affairs and International Trade met this day at 4:04 p.m. to begin its
study on the rise of China, India and Russia in the global economy and the implications for Canadian policy.

Senator Consiglio Di Nino (Chair) in the chair.

[Translation]

The Chair: Honourable senators, welcome to this meeting of the Standing Senate Committee on Foreign Affairs and
International Trade. The Committee is this week studying the new influence of China, India and Russia in the global
economy and the policies that Canada has adopted in reaction to this influence.

We are pleased to welcome before us today Mr. Stephen Poloz, Senior Vice-President, Corporate Affairs and Chief
Economist at Export Development Canada, Mr. Charles Burton, Associate Professor, Department of Political Science,
Brock University, and Mr. Alex Neve, Secretary-General of Amnesty International Canada. Welcome to the Senate. I
would invite Mr. Polov to make a few comments, followed by Mr. Neve and Mr. Burton. We will then move on to the
question and answer period.

Thank you for having invited me; most of my remarks will be made in English, but please feel free to put questions
to me in French.

[English]

Exports are the backbone of the Canadian economy. EDC plays an important role in facilitating that trade agenda.
In 2007, EDC served 7,000 Canadian companies and investors, and 84 per cent of those were small- and medium-sized
enterprises, SMEs. We facilitated business volume in the world of $77 billion. That is a 17 per cent increase compared
to 2006, even though it was a year in which Canadian exporters struggled. Almost $19 billion of this was on behalf of
small- and medium-sized enterprises. Nearly $10 billion was to facilitate Canadian investment in foreign countries, and
about $21 billion was in emerging markets. That was a 37 per cent increase from the previous year.

The EDC operates with no appropriation from governments. In fact, in the last two years, we have provided $600
million in total in dividends back to the shareholder, the federal government. We do this by operating on commercial
principles and providing a wide range of products and services to Canadian companies, in particular, accounts
receivables insurance — which is a very important tool for small companies — contract bonding, insurance and
guarantees, political risk insurance for Canadian investments abroad and financing to foreign buyers to enable them to
buy Canadian products.

Also, we make equity investments in partnership, often with others, in order to encourage very small Canadian
companies. The vast majority of our services are provided in partnership, one form or another, with private sector
financial institutions.

International trade is extremely important for Canada, and we know from previous discussions that a new trade
paradigm has emerged, one in which Canadian companies must focus not only on traditional export and trade but also
on building global supply chains; that is to say, integrative trade, integrating both importing and exporting and foreign
investment to create an ideal structure that makes for good, solid jobs in Canada.

That means that Canada must develop its trade in both of those dimensions, traditional export sales and supply
trade. Some of the best opportunities for developing both of these dimensions are in the countries that you have chosen
to highlight — China, India and Russia. These countries are growing much faster than our traditional trading partners,
so our traditional exports can grow faster than average to those countries. In addition, these countries are often lower
cost centres where it makes sense to develop some of our global supply chains. This is true in other locations, but
China, India and Russia certainly have the potential to become true global powers. EDC has been active in all three
countries.

I will give you figures to illustrate the scale of those activities over the last year. EDC facilitated, for example, in
China, $1.7 billion worth of Canadian trade last year. That is a 25 per cent increase compared to the previous year. We
did this for 394 Canadian companies. We established our first overseas representation in Beijing in 1997 and another
one in Shanghai in 2006 to help companies connect with trading partners.

In India in 2007, $1.2 billion of Canadian trade was facilitated by EDC, over a 60 per cent increase compared to the
previous year, with approximately 180 customers from Canadian companies doing business in India under EDC's
programs. We have two representatives in India, one in New Delhi and one in Mumbai. That gives us the market
intelligence and the ability to connect companies.

Finally, in Russia, another of our top five priority markets, EDC did $1.5 billion worth of transactions for
Canadian companies last year. That is a 28 per cent increase compared to the previous year.

How do we plan to continue this and increase it? The key sectors for Canadian companies in these markets include
the energy and mining investment sector, which includes the sale of equipment as well as the engineering services that
go with it, big products in the transportation sector, the farm machinery and equipment sector, telecommunications,
other areas of light manufacturing, of course the resource sector more generally, and there are big investments in
infrastructure happening where we have the engineering and expertise to make a difference. In EDC, our focus is on
Canadian investors in those markets, helping them to make the right connections and leverage our existing
relationships in the market to encourage Canadian procurement and finding new relationships out there,
matchmaking, or to again encourage more purchases from Canada.

To conclude, Canada must rely heavily on trade, and its future in this respect is not assured. Trade as a share of the
total Canadian economy has been declining for several years. It peaked in 2000 and has been dropping since that time.
Although we have been diversifying into emerging markets, our diversification is not keeping up with that of other
countries. Our investments in these countries and their investments in Canada are not keeping pace with our other
trading partners. In that respect too, we are falling behind.

Canadian companies of all sizes, both big and large, are being challenged to remain competitive in this environment.
The emerging markets that we are discussing offer great growth opportunities for them, but it is hard work. It requires
a lot of matchmaking; often investment in an unknown place with unknown rules and many risks; very good financial
intermediation from banks or other partners, such as EDC; and often face-to-face relationships to go forward.
Investment protection agreements and other free-trade type agreements have the ability to ease these stresses on
Canadian companies.

Finally, as EDC's 10-year mandate review is now underway, we look forward to working with our stakeholders,
including parliamentarians and the Senate, to ensure that Canadian companies remain on a level playing field in the
years to come.

Alex Neve, Secretary-General, Amnesty International Canada: Good afternoon, members of the committee. It is a
pleasure to be here.

Let me begin by making clear what is likely obvious. I am not an economist or a trade expert. That is not where
Amnesty International Canada's expertise or concerns lie. I will not have information, advice or perspective for you
with respect to the dollars at stake, the monetary issues, the numbers of companies, trade balances and imbalances and
other particular economic challenges and opportunities that face Canada with regard to the rapidly emerging global
economies of Russia, China and India.

However, there are very real and important human rights considerations that I would like to highlight in my
remarks this afternoon. For far too long, human rights and the economy have been given very separate and distinct
attention within government's policy circles. That is not unique to Canada by any means. That, despite the fact that
irresponsible business practices and economic policies can and do have a detrimental, even disastrous, impact on the
protection and enjoyment of human rights, while on the other hand responsible and thoughtful business practices and
economic policies can actually make a substantial and sustainable contribution to better safeguarding human rights.

I will start with three very simple but essential human rights observations with respect to the three countries you are
reviewing.

First, there are a range of serious domestic human rights concerns in each of the three countries. Just in the past six
weeks, Amnesty International has released the following urgent actions and press releases: One on behalf of 15 Tibetan
monks who have been arrested following last month's protests but whose whereabouts remain unacknowledged and
whose safety is at risk; one on behalf of a courageous human rights activist who sought to initiate public discussion of
the Olympic Games within China and who was just sentenced to a three-and-a-half-year prison term as a result; one
outlining concerns about the torture of three journalists arrested in India who have been accused of sympathizing with
the country's Communist Party; and one documenting wide and sweeping restrictions on freedom of expression and
freedom of assembly in the lead-up to the recent Russian elections.

Second, each of these countries has significant human rights impact in its foreign policy as well. Certainly, that is the
case with the influence Russia brings to bear on the countries of central Asia; China with countries as varied as North
Korea, Burma and Sudan; and India when it comes to Sri Lanka and Nepal.

Third, all three are important global players in multilateral settings where significant decisions concerning human
rights are at stake. Most notably, perhaps, Russia and China of course both carry a veto in the United Nations
Security Council.

I would like to pause here for a moment and say a word, in particular, about China. I do so both because of the very
real currency of the human rights concerns in China, clearly in international focus as the Olympic torch continues its
troubled, volatile relay, but also because, of the three countries you are considering, it is undeniably China where we
have the most extensive, lengthy history of experience and lessons learned when it comes to the interface between
economic policy and human rights policy.

China's sorry human rights record, presently the subject of many headlines, is nothing new. Even before the
troubling crackdown in Tibet last month, the human rights reality in China was dismal indeed. Minority groups such
as the Tibetans and the weaker people in the country's western district have certainly felt the brunt of Chinese
repression for far too long; so too have the Falun Gong, democracy activists, HIV/AIDS campaigners, internet
bloggers, labour activists, human rights lawyers and activists, and others. Torture is widespread. Arbitrary arrest and
unfair trials are the norm. The extensive use of notorious re-education through labour camps continues to violate a
range of fundamental rights, and more people are executed yearly in China than in the rest of the world combined.

All of this is in a context of secrecy and a refusal to be open and transparent about human rights. Thus, the world is
banned from Tibet in the wake of the crackdown. Canadian officials are given no access to Huseyin Celil, a Canadian
citizen of weaker ethnicity who has been imprisoned in China for close to two years. Trials are not open to the public.
Individuals on trial are rarely allowed to be represented by a lawyer of their choice. UN human rights experts have
great difficulty in negotiating adequate access to China, and independent human rights groups, such as Amnesty
International, have never been given access.

There was hope that the decision to award this year's Olympics to China might prove a catalyst for improving this
distressing human rights picture. China made that promise, and the International Olympic Committee, IOC, believed
that promise. However, the IOC sadly did virtually nothing to remind China of the promise in the eight years that
followed, to stress how important it was that the promise not be betrayed. With just four months to go now, our view is
that the Olympic Games themselves have not only not been a human rights panacea in any way, but instead it is now
clear that, in important, distressing respects, they have contributed to human rights violations in the country.

Add to this, now, the global foreign policy might that is increasingly wielded by China, usually driven by interest in
securing access to oil and minerals needed to feed that country's supercharged economy. There is very little evidence of
human rights considerations factoring into that policy at all as Chinese government and business officials fan out
across the globe and make new friends and negotiate contracts. In Burma, China sells weapons. In Sudan, China
pumps oil. Both have enormous human rights implications, but concern about the human rights effects simply does not
factor into China's approach to doing business with those countries.

Canada has had a troubled history over the past 10 years when it comes to putting together our economic interests
in China and the obvious distress about the human rights scene. In 1997, a decision was made to take the human rights
piece off-line, to no longer raise human rights concerns publicly and to, instead, pursue those issues only in quiet,
backroom dialogue sessions.

Instead, all of the political might went into cultivating the business relationship, with high-profile trade missions
becoming standard fare. The very real concern was that human rights were being pushed far into the back seat and
business interests were the force guiding and determining the nature of Canada's relationship with China.

Where does all of this leave us? I will end with a number of recommendations. The first is a procedural point, but an
important one with respect to China, in particular. Members of this committee may know that there has been a recent
and thoughtful study by the House of Commons Subcommittee on International Human Rights, under the Standing
Committee on Foreign Affairs and International Development, with respect to the Canada-China human rights
relationship. That study inevitably has examined the interplay between economic considerations and human rights
concerns in some detail.

The report is complete; it was submitted to the Foreign Affairs Committee in the last session of Parliament but was
then tied up and not approved by the committee before the end of that session. It has recently been resubmitted to the
House of Commons Standing Committee on Foreign Affairs and International Development, and we hope the
committee will move quickly this time to ensure the report is released.

It almost certainly will have findings and recommendations that will be of interest to you in your work as well. Any
efforts this committee can make to press for the report's release would be welcome indeed.

Second, Amnesty International Canada and other Canadian-based organizations have long pressed Canada to
adopt a comprehensive, whole-of-government approach to our relationship with China; one that does not siphon off
human rights to some forgotten back corner but rather puts human rights at the centre of all aspects of our relationship
— business, cultural, immigration, agricultural, foreign policy and more. That would be a sound approach with respect
to Russia and India as well.

Third, human rights must be prominent in all initiatives and agreements on the economic front, be it the negotiation
of free or freer trade deals, the adoption of foreign investment protection agreements, the planning of high-level trade
missions and more. Human rights cannot continue to be an asterisk or afterthought.

Fourth, the government should begin to require more frequent use of human rights impact assessments before
government or businesses make decisions about important commercial deals or initiatives.

Fifth, just over one year ago, a remarkable process of round tables wrapped up, examining policy options for
promoting corporate social responsibility in the overseas Canadian extractive sector. The round tables involved all
stakeholders, including business, civil society, academics, industry associations, labour, investment firms and
government. An advisory group drawn from those sectors found unparalleled consensus around a comprehensive set
of recommendations for a new Canadian corporate social responsibility, CSR, framework.

One year on, there has been silence from the government as to where it intends to go with the recommendations.
That new CSR framework, which has been welcomed by business and by non-governmental organizations, NGOs,
would help alleviate many of the concerns that arise about human rights in business dealings between Canada and the
three countries you are reviewing.

Last, moving on to the international stage, we want to see and need to see strong standards and approaches to
corporate social responsibility developed nationally, but this is a global economy in which we operate. Ultimately, we
need an effective international approach to ensure that human rights are not sold short in the interests of trade and
investment.

An effort to elaborate international-level business and human rights norms within the UN human rights system over
the past several years has, to date, proven unsuccessful. However, UN attention to this issue continues. A high-level
special representative of the UN Secretary-General, John Ruggie, a professor at Harvard Law School, is wrapping up
three years of work on this issue.

The UN Human Rights Council will decide this June whether to renew that mandate. It is our understanding that
Canada does support a renewal. However, renewal to do what is the question.

We believe it is crucial that Canada press for this position to carry a new mandate that would work toward the
elaboration of global-level norms with respect to business and human rights. Such norms would, of course, have
universal applicability, including to Russia, India and China.

Charles Burton, Associate Professor, Department of Political Science, Brock University, as an individual: It is an
honour to speak to a parliamentary committee in our Canadian democracy. I would like to limit my comments to
discussion of the rise of China in the global economy and the implications for Canadian policy because, frankly, I do
not have enough expertise in anything else.

I would say that it is a special sort of topic because of the significance for China itself of its own rise. China's
increasing importance to the global economy is one aspect of what Chinese policy-makers refer to as China's
comprehensive rise to power. China's economic rise is understood as part of an overall strategy, whose goal is to
transform China into a great power politically in international relations and to promote China's cultural influence in
the world. Therefore, most Chinese people, in China's government and in the Chinese populous at large, see China's
economic rise as serving China's greater purposes in the political and cultural realms.

One has to understand how the Chinese people understand the position of China in international relations in terms
of their history. Chinese people, in general, have a strong sense of their own history and enormous nationalistic pride in
the greatness of the Chinese civilization and culture. They have a long historical memory. This memory understands
their historical tradition in terms of a flourishing past, but also a decline in China's relative position in the 19th century
and a significant opportunity for China to rise to possibly global predominance in the 21st century.

When Marco Polo went to China in the 13th century, he described a China that was superior to the West in pretty
much every way. Technologically, they had porcelains, fine silk fabrics and a large number of items that the West did
not have the ability to produce. In arts, culture, governance and trade Marco Polo saw China as superior to Europe in
that period. For example, he noted — and I believe correctly — that the port at Quanzhou in Southern Fujian was a
more important centre for international commerce than even the great port of Alexandria in Egypt. Chinese people
remember this because they have a long history, and a couple of hundred years is a short amount of time.

However, in the 19th century, China lagged behind the subsequent remarkable rise of the Western nations in
commerce and technology. By 1840, China was forced to make humiliating concessions to the British, including ceding
Hong Kong to Britain as a colony, after China lost a war with Britain over the right of Britain to sell opium in China,
which had been banned by the Chinese government. There were other indications of China's weakness that involved
other imperialist powers taking control of China's territory.

At this time, China became characterized as the ``sick man of Asia.'' The greatest blow to Chinese pride was the
Japanese success in gaining colonies in China, particularly in 1932, when Japan was able to sever the entire
Manchurian region off the north of China and turn it into a puppet state of Japan.

China and Japan have traditionally had, from the Chinese point of view, a big brother, little brother relationship.
The Japanese were behaving in a way that China felt was wrong in terms of the way the world should be.

The new regime of 1949 was established to restore China to its past greatness. Chairman Mao declared the People's
Republic of China with the words, ``The Chinese people have stood up!'' This was to make a new and strong regime
that would redress the humiliations of the past, inflicted on China by Western nations and the Japanese, and restore
China to greatness, to what the Chinese referred to as a modernized, strong country.

It is this psychology that informs the very strong nationalistic response to Western criticism of China's recent
human rights violations in Tibet and that causes enormous distress for Chinese people when they see that the Olympic
torch is not being welcomed as it makes its parade around the world — or at least not welcomed by everyone.

After 30 years of sustained high economic growth rates, China is now an important player in the world economy
and an important factor in Canada's prosperity, of course. I am happy to see this Senate committee investigating the
implications of China's rise for Canadian policy. China's rise has very strong implications for Canada and the entire
world economic and political order in the years ahead, so it is incumbent on us to take it very seriously.

I do endorse Mr. Neve's concerns about the House of Commons Foreign Affairs Committee not being able to
schedule consideration of an important report on China that was submitted to it by a subcommittee.

There is a school of thought popular among Chinese nationalists that sees China rising to a position of global
predominance in the years ahead. The argument goes that the United States as a declining power has overextended
itself in military adventurism in Iraq, Afghanistan and elsewhere, and has allowed itself to become mired in debilitating
foreign debt, much of it, as we know, held by China. The argument is that as the United States grows weaker, a rising
China can move to eventually supplant the United States in its role as the leading global superpower. China would
thereby be able to use this strategic leverage to resolve the Taiwan issue — the return of Taiwan to the embrace of the
motherland, as Chinese documents put it. The Chinese nationalist vision asserts that, without the United States as a
check on China's rise, China would be restored to what it regards as its rightful historical position as the pre-eminent
global civilization. According to this view, the hegemony of the English-speaking peoples over the global affairs that
has been in force for close to 200 years would come to an end and be replaced by a new Chinese era, a new Chinese
global hegemony.

This type of Chinese-dominated future is dependent on a number of factors that may not come to pass in years
ahead, but it is important to be aware of concerns we might have with China's continuing rise based on observations
now as China becomes more assertive in its bilateral relations and participation in global institutions, such as the
World Trade Organization, WTO and the United Nations because China is a much more powerful nation than was the
case even just a few years ago.

These concerns centre, in my view, on China's sense of global citizenship, that is, in terms of China's willingness to
follow the existing norms of international relations. There are concerns about China's interpretation of its obligations
to the United Nations human rights covenants that it signed and its less-than-satisfactory role in the UN Human
Rights Council. There are concerns that China is pushing the boundaries of the accepted consensus of the range of
interpretation of the rules of the WTO in a number of areas, including expectations of transparency and openness.
China has also been reluctant to assume its share of responsibility to take action to address global environmental
issues.

I remain concerned that as China becomes a more powerful nation in the world, China may tend to impose its own
interpretations of the terms of important treaties and conventions that govern international relations in ways that
would tend to serve Chinese interests more than the overall interests of the international community. Canada's
prosperity, security and ability to stand for democracy and human rights as universal goods, both domestically here in
Canada and internationally, could be degraded by the rise of a China that does not internalize these values of global
citizenship.

We should devote more attention and resources to our relationship with China because it is a country that is
important to us now and will almost certainly be much more important to Canada in the years ahead. We do not want
a powerful, non-democratic, strongly nationalistic China that would attempt to impose non-democratic norms on the
international order of the increasingly globalized world into which Canada is more and more integrated. A wealthy
and powerful democratic China would be of benefit to global prosperity, the environment we all share and the cause of
furthering international human rights.

In conclusion, it is important that Canada continues to engage China bilaterally and multilaterally on its
international obligations to fulfill the terms of the UN covenants and treaties it has pledged to uphold and to fulfill the
terms of China's entry into the WTO. In this regard, a future democratic China is strongly in the interests of both
China and Canada.

The Chair: Let me start by bringing to the fore what the last two speakers have been dealing with. What role should
values, freedoms, rights, et cetera, play in our economic relationship with China? I would like an opinion from all three
of you.

Mr. Neve: Our perspective is that human rights values, which we stress often in the debates with respect to China or
internationally, and the applicability of human rights, suggests that it is about trying to apply Canadian values or
Western values to other countries. When we focus on human rights, it is important to stress we are talking about
universal values that go back to the UN Universal Declaration of Human Rights, which, for our purposes today, it is
notable to highlight that it was a Chinese delegate at the United Nations at the time who was one of the central players
in ensuring the emergence of a strong Universal Declaration of Human Rights. There was a very robust Chinese voice
that played a key role in the development of that document.

Those are the values that we think are at stake here. From a human rights perspective, it is essential, be it with
respect to economic issues, security matters or any other dimension of government policy, that human rights are at the
centre. Human rights require and merit it, because in the business arena, as I said in my opening remarks, the potential
for bad decisions to have a disastrous impact on human rights is very real. It is also in the best interests of business as
well.

Many of the issues we are concerned about on the human rights front revolve around the rule of law. It is being able
to rely on the justice system to protect rights and on the courts to be there to ensure that rights are not violated. All of
that is in the interest of good business as well, ensuring that contracts are enforceable, business relationships are
respected and that there is the rule of law and justice behind that.

From our perspective, it is a win-win situation on both sides. Human rights demand that, when it comes to our
business relationships, we are paying central attention to human rights values. However, that is also the right thing to
do for business.

Mr. Burton: As a supplementary comment, the Chinese Communist Party used to be the party of workers, peasants
and soldiers. It defended the common people. It has now changed into a party of power and money.

It is not desirable for large Canadian corporations to become implicated in Chinese communist corrupt business
networks. It is important that Canadian companies abroad should behave in a way that is ethical and a credit to our
Canadian values. They should not be able to engage in activities that, in our own country, would be illegal.

These questions do come up because of the incompatibility between our two business cultures, that of China and
that of Canada. The United States perhaps has been more proactive in addressing this than has Canada. Many
Canadians are making a great deal of money in China in ways that are not absolutely clear to us as to how they
acquired such great wealth.

The Chair: Mr. Poloz, when you are dealing with your relationship with businesses that require your services, do you
place any conditions on the relationship? We talked about the rule of law. We talked about labour laws and
environmental issues. Are these part of the negotiation when you are assessing a potential opportunity?

Mr. Poloz: Yes, they are. At EDC, we have a very extensive set of CSR principles at work, especially on the
environment. On the environment, we are a recognized leader among international financial intermediaries, a signatory
to the Equator Principles and as well have our own legal requirement, the Environmental Review Directive.

On the full range of CSR issues, we have a strong package of due diligence, specifically with respect to human rights.
As my colleagues will, I am sure, confirm, this is the least well-developed part of the CSR world in terms of the
literature. We value human rights and want to ensure that for the activities that we do facilitate in a foreign country,
that we have done our utmost to ensure that there is no potential for adverse human rights outcomes with respect to
those activities. For that reason, we do extensive due diligence and even more extensive due diligence in areas or with
projects where we believe there may be higher than average potential for human rights issues to emerge.

In that way, we have a best-in-class type of approach to this at the moment, but we recognize it is highly
evolutionary. We follow the activities, for example, of Mr. Ruggie. We spoke to him, and we keep track of these
matters and solicit the views of our own CSR advisory council, which is comprised of a number of prominent
Canadians, in developing our overall policies and the way we go about this.

Senator Stollery: Following on the question of Senator Di Nino, I heard two figures for the number of Chinese that
have been brought out of poverty with the current economic boom over the last few years. One is 200 million people,
and the other is 300 million people. Could you tell me which number is the most believable?

Mr. Burton: It depends on the definition of ``brought out of poverty.'' A large number of people in China, and it is
hard to count them, but let us say 80 million or so, still have trouble ensuring they have enough calories to keep their
bellies full and enough clothes to keep their bodies warm. I would think that estimates are that that number in the past,
such as when I was a student in China in the 1970s, might have been closer to 300 million; that was at a time when the
population was only about 800 million as opposed to 1.4 billion today. At that time, a significant proportion of the
population still had issues with food, security and the ability to have enough fuel and enough clothes to wear. That
number has, in fact, significantly declined. It comes down to the definition of ``poverty.'' The way most people live in
China, of course, would be well below Canada's accepted standards of living.

Senator Stollery: I was also in China in the 1970s, and I was in Asia in the late 1950s. People lived outside of the cash
economy. That is, of course, a whole other subject. It is interesting to see how successful have they been.

Mr. Burton: Also, in terms of the regime, it is important to bear in mind that when the Chinese Communist Party
came into power, the population might have been 500 million or so. It has now almost tripled. The amount of available
land for agriculture has stayed the same, and still people are able to get enough food to sustain life, which suggests that
the regime was quite successful in terms of irrigation projects and the green revolution to improve the productivity of
land. One can say many negative things about the Chinese communist regime, but they have some outstanding
accomplishments that are an inspiration to the Third World, and that would be one of them.

The Chair: Senator Stollery, we will have opportunity to speak to others who would be more in line with that.

Senator Downe: I would like to explore further the EDC's supervision of their investment in some of these countries.
As an independent Crown corporation, you are still bound by government's overall direction, I assume. For example,
on Burma, where the oppressive military dictatorship has been causing tremendous problems for the citizens of that
country, the government introduced guidelines and a framework for operations between Canadians and that company.
Does EDC follow those exactly?

Mr. Poloz: Absolutely, to the letter. We operate completely consistently with government policies. We are a wholly-
owned arm of the Government of Canada and report to Minister Emerson through Foreign Affairs and International
Trade Canada. All those policies apply to us exactly as they would anywhere else.

Senator Downe: Your board of directors does not have to discuss these. You automatically adopt them when the
government announces them. Is that correct?

Mr. Poloz: That is correct.

Senator Downe: Mr. Burton, I enjoyed your presentation on the historical overview. What sign, if any, do you see
for China to become a democracy in the near future? Is there any movement at all in that direction?

Mr. Burton: I have a background in this. I worked in the Canadian Embassy in Beijing on two postings, most
recently responsible for the human rights and democratic programming. I do not see any indications that China's
political system is evolving toward a liberal, democratic one any time in the future. I do think that, under current
conditions, we are seeing a more polarized situation because in the recent Tibetan crisis, human rights and nationalism
have been conflated.

Chinese people feel so strongly about what they refer to as their sacred continent and respond emotionally to any
suggestion that Taiwan or Tibet would be separated from China, and this has caused the Chinese people to feel
negatively toward the West. They believe the Western media is attempting to suppress China's rise to greatness. As a
result, after the Olympic Games are over, as Mr. Neve said, instead of China's human rights situation being better, we
might find that we have even less leverage with the Chinese authorities with respect to our desire to see China come
more into compliance with the international goods of democracy and human rights.

I am not optimistic at all about this as long as the current regime is in power. Normally, one would expect with an
increase in technology, that there would be more democracy or with a rising middle class, that they would want to have
the ability to participate in the political process to protect their economic interests. However, we are seeing that
technology — television and Internet — is being used to consolidate this nationalism, this anti-Western, anti-
democracy nationalism. The middle class appears to have been co-opted by the Chinese Communist Party, and instead
of supporting democracy, they are afraid if the underclass is in power, they would lose their privilege. It is not working
out the way we political scientists thought it would. I am deeply sorry to have to report that to you.

Senator Downe: I appreciate your professional opinion. I am interested in the figure that you mentioned; the 80
million people, more or less, who have trouble putting food into their bellies. We keep hearing of eruptions of riots and
such among that group of people in China, but they continue to be suppressed by the government. Is that the case?

Mr. Burton: When people are living in conditions of absolute poverty, they are inclined to be focused on pure
survival. However, as their conditions improve a bit, then they become more interested in justice. These instances to
which you refer could, in fact, be due to a slight empowerment of the underclass. Therefore, they can focus on the
problems that they are facing and you can start to get this ``we are as mad as hell, and we are not going to take it
anymore'' type of response.

For a long time, the regime has promised that the benefits of reform would eventually be coming to them. However,
now that we have had the reform opening in China for 30 years, a large number of people feel that it is not happening
for them, and they are still living in very difficult conditions without much hope of any change.

Mr. Neve: I will pick up on Mr. Burton's observation of this flicker of empowerment that we sometimes see in and
around some of those situations, which I agree with. Many of those instances of protests, where the protests are put
down and there has been loss of life and imprisonment are worrying from a human rights perspective. Within those
communities in China, and more widely, we are seeing activists and lawyers who are starting to speak out about those
issues and are even turning to the court system to try to push some of those issues forward. They are, in a savvy way,
trying to gain not just international attention — there has always been the impulse to get this issue out to the world —
but also national attention. This is encouraging and is very much in its inception. They are beleaguered, brave and
courageous; a small group of activists and lawyers, I would urge, who are very much deserving of focused support and
attention from the international community, because there is so much hope on that front if it continues to take hold.

[Translation]

Senator Nolin: I would like to come back to one of the issues brought up by Mr. Neve, namely respect of the rule of
law. What is your assessment of the respect of the rule of law in China?

Mr. Poloz: That depends on the project. One must take into account the socio-economic context as well as the local
traditions surrounding the project. One must analyze not only the overall economic situation of the country, but also
all of the circumstances impacting upon the project, in order to see how they might have a positive effect or not on
human rights and improve or not local living conditions. If there is a risk of negative repercussions, the project will be
aborted or put off until later, until the organizers have made the necessary improvements.

[English]

Senator Nolin: I understand your willingness to be very respectful of the Canadian interests over there, but give us
more meat. I was asking you to be a little more precise.

I understand the theory that you are facing, but what is the situation now? What is the respect for the rule of law?
What is your reading of that? Let us say, for example, that I want to invest $1 billion over there. How should I treat the
contract? What about the courts? Who is in charge of the rules? How have those rules changed? Will I be informed if
those rules are to be changed? Those are the types of concern Canadian investors may have.

Mr. Poloz: You are absolutely correct.

Senator Nolin: I have the Russian experience in mind. I am sure you were around, and you can give us some
enlightenment on the experience in Russia.

Mr. Poloz: There is absolutely no doubt that Canadian exporters and investors are very concerned about the issues
you raise. The fact of the matter is, though, that Canadian investors have shown disproportionate concern for these
issues compared to investors from other countries. Canada has invested less in China compared to the size of its
economy and the size of its trading relationship than, for example, American or European investors. There is no
question that Canadian companies are more concerned about these issues than their counterparts in other countries. I
do not have an explanation for you on that.

We have observed that the situation has improved steadily over the past eight to ten years in that those senior public
service types or those who are connected to such things, as well as ordinary private business people, understand that
they need foreign investment in order to make their economy grow the way they expect it to and that they will not get
everything they are looking for if they have a bad reputation in this respect.

That process of endogenous improvement, if I can call it that, I believe is actually occurring. Does it measure up to
our own standards? No, it does not.

Senator Nolin: That is not what I am asking. I am asking you as an important Canadian representative, supporting
business and Canadian interests, in the three countries we are studying. Of course, you have a role to alert, to lay down
the markers with respect to what one should watch for.

Am I summarizing your role as sometimes a bit torn between the answer your due diligence is giving you and the
willingness of almost every businessperson in Canada wanting to do business in China?

Mr. Poloz: The usual context is one in which a Canadian company is considering making an investment in a place
such as Russia, for example, and they would approach EDC and ask for guidance, advice, contacts, et cetera. We have
people in the marketplace. We have someone in Moscow who spends their full time in Russia. We know people in the
marketplace, so we will go there with them, talk to the people and do our due diligence. They will often be looking for
political risk insurance coverage for their investment. It is totally up to us as whether we are able to underwrite that
decision for them and protect them against a range of political risks.

We have to do the hard work to decide if it is acceptable; we charge that person a premium for that insurance policy;
and we put it in place. It has been a successful program in bringing the barriers to investment down for people, but it
does require a great deal of due diligence from us. I cannot make a blanket statement about what is and what is not
good, but the ones we do, we look at carefully and agree we can do it.

Mr. Neve: I just wanted to add a sombre note about the rule of law in China. It is not in a business context but very
much from a Canadian perspective. This is the experience of Huseyin Celil, who is a Canadian citizen, originally of
Uighur nationality, who was unceremoniously and illegally sent from Uzbekistan to China in June 2006. He was then
held incommunicado, his whereabouts never disclosed and his arrest and detention never acknowledged by Chinese
officials, for some four or five months. Then his presence in China was acknowledged by the Chinese government, and
a judicial process of some kind was launched, but the details of that process were never shared with his family; his
family was never allowed to visit him and neither were Canadian consular officials.

This all led up to the spring of 2007, when we learned he was sentenced to a life prison term. That was followed by a
quick, pro forma appeal process, which reconfirmed the life prison term. Throughout both the original trial process
and the appeal process, the courageous Chinese lawyer, who had been retained by the family to try to represent him,
was given no access to the legal proceedings and was not allowed to make any representations on his behalf.

Now sentenced to a life prison term, we have recently learned that his whereabouts are no longer known. The prison
where he was being held told his family in March that he is no longer there, but no one will tell them where he is. That
is the rule of law in China right now with respect to a Canadian citizen. That is not enforcing contracts, but it is an
important reminder of how this plays out, including for a Canadian citizen.

Senator Nolin: Mr. Poloz, when you are assessing the risk, and it is your business to charge a premium to cover that
risk, you must have a series of factors that are influencing or aggravating the situation of your risk assessment. When
you hear a story such as that, I am sure it affects your analysis: If they are capable of doing that, what about the
contracts? It is the same people, the same mentality; if it is in their interest to change the rules, what about the risk
evaluation? Are you influenced by that?

Mr. Poloz: Of course, it is very disturbing to hear stories such as this. I would have to put that up against our history
of dealing with companies we know, people who run the companies, whom we know and have done business with in
the past and have had no problems with payments or contracts of any sort. That experience stands there, and then we
hear these situations. It is disturbing yet completely separate from the situation you are actually considering.

Does it bother me? Of course, it does. However, when we do the business analysis, when we have to look at the
actual risks that have been played out through time, I will stand by my previous statement that in those respects
contract adherence and the dependability of the business relationships have been steadily improving in my experience
with China — and especially Russia, it has been a faster move in Russia.

Senator Nolin: In Russia in the last five or six years, there was an improvement in the quality.

Mr. Poloz: Yes, there was an improvement.

Senator Nolin: You are saying that if we can avoid going to court, let us have a good business relationship. Bullet-
proof does not exist, but the relationship with such a Chinese business partner is good, so we will hope for the best and
no problem.

Mr. Poloz: That is right. Fundamentally, the business transaction is not between Canada and China. It is between
two people. We get to know that person, and there is a certain amount of trust — just as there is in a transaction in
Canada.

The Chair: Surely, you have to take a look at the ability to recover the asset or recover your investment through the
rule of law. That does play a role in your decision making, does it not?

Mr. Poloz: Absolutely, it does. When we encounter a problem — for example, someone in China does not pay a
Canadian receivable, and we have insured that receivable — we would pay the Canadian exporter 90 per cent of the
value of the contract. Then we would use usually a combination of our own work and a local legal firm in order to
pursue redress.

The Chair: You make sure that the institutions are there.

Mr. Poloz: Yes, we do.

The Chair: To allow you to be able to do that, you satisfy yourself to the degree that is possible. Am I reading you
correctly?

Mr. Poloz: That is correct. Often the individual who may have decided they do not need to pay this little Canadian
company does not realize there is a multibillion-dollar organization standing behind that little Canadian company.

The Chair: That is you.

Mr. Poloz: I find that is quite helpful at times, yes.

Senator Corbin: In your preliminary remarks to this committee, you alluded to a 10-year review. You referred to
parliamentarians of both Houses as partners in whatever it is in which you are involved. When does that review end, as
far as you know?

Mr. Poloz: The exercise has just begun. It is a 10-year sunset review, which was last done in 1998. It was just
launched.

The minister has engaged an outside consultant to review Export Development Canada over the next several
months — spring and summer. I believe mid-November is when Minister Emerson is scheduled to table the report on
EDC.

Over the course of that time, there will be opportunities for the general public to speak to the consultant, give their
views, et cetera.

Senator Corbin: In what context and fashion? Are these open meetings; is the public generally invited to regional
meetings? What are the mechanics?

Mr. Poloz: The details are not finalized yet; but the consultant will be holding a series of open-forum meetings
across the country and will be actively soliciting views directly through a website and other written depositions to get
the widest possible set of views primarily on what Canadian companies are likely to need over the next five to ten years
in order to deal with this more global economy. Whether EDC is able to fulfill that, or should play a role, is a separate
matter. However, they will be identifying what those needs are and, in that context, they will review EDC's mandate
and its regulations to see if they need any fine tuning.

Senator Corbin: At what point does Parliament get involved?

Mr. Poloz: That would be subsequent to the tabling of the report. The minister will be tabling the report in mid-
November; at that time, the parliamentary committees will take over.

Senator Corbin: Will they do their thing and report back to Parliament?

Mr. Poloz: It will probably be another year or so from now before we are finished with that process.

Senator Corbin: Could you tell me something about the interplay between your organization and other involved
government departments in trade and commerce generally?

Mr. Poloz: We are very active partners with our colleagues at Foreign Affairs and International Trade Canada,
DFAIT. In fact, the trade commissioner service out in the embassies spends all day, every day, trying to connect
Canadian companies with buyers and potential investment opportunities. EDC works hand in hand with those to bring
the financing or insurance products to the table when it can be of assistance. There is active collaboration there.

We also have an active collaboration with the Canadian Commercial Corporation and with the Business
Development Bank of Canada, BDC, which, of course, is primarily a domestic operation — but, again, with the small
companies, that may also be exporters; so there is a collaboration space there.

We also collaborate extensively with people over in Industry Canada and Department of Finance Canada.
However, the primary collaboration is with DFAIT.

Senator Corbin: Speaking nationally or regionally, in terms of Canada, where do the majority of your customers
come from? Do you have a breakdown of people coming to you from New Brunswick, Nova Scotia or Prince Edward
Island, for example? I am sure you have them for Quebec, Ontario, Alberta and British Columbia.

What is the picture like there? Are people in the outlying areas of Canada as well informed as the people next to Bay
Street, in Toronto, for example?

Mr. Poloz: Yes, they are. As I mentioned in my remarks, there were approximately 7,000 Canadian companies that
used EDC's services in 2007. The distribution of those companies across Canada, in my opinion, looks very much like
the distribution of economic activity across Canada. There is no question that there is a preponderance in Ontario and
Quebec, where there is a preponderance of manufacturing businesses. However, I believe that last year the leading
region was Western Canada, where there has been a great deal of growth in the last two or three years. Atlantic
Canada is very well represented. There are companies everywhere in Canada.

We have regional offices across the country to ensure that that is the case, that they are well-informed. Every
province has at least one office with EDC representatives who visit the companies face to face and talk to them about
their business plans to see whether there is a place where EDC can take some of the risks away from them to make it
easier for them to go global.

[Translation]

Senator Prud'homme: I thought that my colleagues were putting a lot on their plate when I saw the Committee's
mandate. A study on the emergence of China, India and Russia, that is quite the mandate. One can go off in all
directions without even scratching the surface of the issue. I have tremendous admiration for my colleagues who show
such patience. I will perhaps be somewhat more down to earth because I am the elder here — not the oldest, but the
eldest — and I have witnessed certain evolutions.

I created the Canada-Russia Association when Russia was called the Soviet Union. I created the Canada-China
Association when Mao-Tse-tung was in power. I am somewhat uncomfortable because I have seen this evolution that
newer colleagues have perhaps not been able to appreciate.

I will seek inspiration from Mr. Charles Burton's study. In just a few words you have well grasped and summarized
things. For my part, the emergence of China is not a source of fear. Why would it be that the United States of America,
our neighbours and friends, should be the example for the world? I enjoy competition and this is why I am enjoying
this emergence of Russia and China — I am clearly putting my cards on the table —, among other reasons because I
appreciate the existence of a certain balance in the world and because it is unhealthy that there be one single
superpower, whoever it is, even if it is our neighbour and friend. For me, this is essential.

Very often, when we talk about China, we take one or two examples, and there are a few, but the rest is often
ignored. Having denounced my interest, which is purely Canadian, and not specific to Quebec, it is a very distinct
interest for China and Russia, and I find that we should be more frequent witnesses of the changes occurring over there
and that we should look at the influence that we might truly have.

And this is at the heart of my question: do you not believe that we could exercise a different type of influence?

For example, in the case of the Canada-Russia Association, there is very intensive parliamentary diplomacy. I call it
parliamentary diplomacy, because it is a term that I learned from my professor, Julio Andreotti — imagine that, I go
back to the 1970s. He is the one who invented the term and he gave it to me. Today, everyone talks about
parliamentary diplomacy. It is the importance of parliamentary relations tied into the expertise of the Foreign Affairs
Department and of people like you, the specialists, the professors, the human rights advocates; it is the importance of
witnessing what is happening. Never before have I seen so much activity between Russian and Canadian
parliamentarians.

Mr. Chair, Senator Di Nino is often called upon to go and meet with colleagues active in all areas: military,
economic, parliamentarian; they want to know how our committees work, et cetera. This is evidence that we can
exercise not necessarily verbal, obvious and global influence, but rather discreet and effective influence, the same could
be said with regard to China.

Unfortunately, people do not seem to understand the sensitivity of the Chinese — and as the elder here, allow me to
state things as they are — who are not at all happy about the public criticism they are getting but who are very good at
accepting messages amongst parliamentarians, for example, between members of the National People's Congress and
our parliamentarians. A good many problems could be resolved at that level.

I would like to hear your comments and I would invite you to tell me if I should be adjusting my aim as I get older
— I do not have many years left. The Chinese are much more sensitive to criticism coming from the outside, whereas
they are prepared to make reforms; but China is a gigantic country. Imagine if our government were faced with having
to create cities for 10 million inhabitants, every ten years, by the dozen. It is an enormous problem.

In my view, we often will latch on to one or two events and blow them out of proportion. I am neither a
businessman nor a lobbyist, and I want that to be quite clear. I am on no one's payroll! It is my belief that the way for
us to exercise influence is not in following the road we are on. Perhaps we will need to do both things at once, to wield
the hammer with one hand and to heal wounds with the other.

Professor, I must tell you that I was truly enchanted by your text. My colleague was reminding me that we send
judges afield. Who is aware that the legal system in China is ready to welcome Canadian judges as teachers? This
program exists, and I imagine that you are aware of it, but these things cannot be accomplished overnight. The danger
is that with our caustic criticism we risk seeing these programs dismantled because of the Chinese people's pride. That
is my dilemma, Professor.

[English]

Mr. Burton: It is wonderful to hear of your experience of so many years in dealing with Russia and China. I agree
with you that the idea of engagement is an excellent idea.

I am concerned, in terms of the parliamentary exchange program between the Parliament of Canada and the
National People's Congress, that it might be perceived to establish a moral equivalence between these two institutions.
The Parliament of Canada is based on sound democratic principles and fulfills its function as determined by the
Canadian Constitution.

The National People's Congress of the People's Republic of China is an organization that, while it is described in the
Chinese constitution as the supreme organ of state power, essentially only meets two weeks a year in March. The
members have no constituency responsibilities. They are not elected by a free and democratic election.

Senator Prud'homme: It sounds similar to the Senate.

Mr. Burton: I am actually rather more of a fan of the Senate than one might think, but that is out of my area of
expertise, simply because I have met a number of senators. In any event, it is not really the same.

It is important to continue to work with those people. However, we have had programs with the National People's
Congress for many years and have had a lot of expectations that they would see how our political system works, and
that once they understood it, they would say, ``This is a great system. We should try to get this for our country.''

However, practically speaking, the years go by and one does not see much democracy happening in China.

It seems many of these activities are designed by the Chinese communist authorities to give the impression that they
are taking our concerns seriously. However, practically speaking, they are not prepared to implement any or very much
of what we think they should do.

In terms of the judges' program, I do like that program. In our country a judge is a prestigious member of the
community. In China, judges do not tend to hold that same status. They tend to be rather junior people for the most
part and, as a result, the rule of law is not so important in China with respect to who you know and how you are able
to defend yourself through getting assistance from persons who have influence and power.

If one looks at doing business in China and one chooses a partner who has the capacity to fulfill the contract, that is
probably a greater guarantee to ensuring return of investment than relying on the Chinese judicial system to deliver a
fair and impartial judgment in a case involving a Chinese person and a foreign person. Typically, one finds that the
foreign person often does not win if a Chinese person has been able to bring something up to a judicial case.

I have been trying to engage China now for 30 years. I have some sense of — occasionally — despair, but I do not
plan to give up. I have another 20 years of working life and will continue to keep pressing to try to spread the word
about Canada in China, and maybe something good will happen. We must be aware that the process is not always the
way it is depicted in the invitation the Chinese people extend to us.

Mr. Neve: You have powerfully outlined one of the great dilemmas in human rights diplomacy, be it with respect to
China or any other country. That is, the notion of quiet, constructive engagement on one hand and public — I think
you used the word ``acerbic'' — criticism on the other.

Unfortunately, what we often hear, be it with respect to China or any number of countries, is that it is almost one or
the other. You either take everything behind closed doors or you take everything out into sort of loud, angry, public
venues. Of course, the answer is it is in the middle. The balance between the two must be finely calibrated and changes
all the time, sometimes daily, be it with respect to a particular country or a particular issue you are pursuing with a
country.

We have been concerned, therefore, that in our relationship with China, we did take it all the way over here to this
extreme. Back in 1997, we made a policy decision that everything would be through avenues of private, quiet
engagement. We are not opposed to those sorts of processes. The human rights community is a strong supporter of the
notion of engagement, as long as it is genuine engagement toward some real ends with effective strategies for getting
there.

The committee may or may not be aware that Professor Burton has done a superb evaluation with Canada's
approach to dialogue and engagement with China. It highlights the many ways in which that dialogue process was
deeply flawed, but those are flaws that can be improved if the political will is there on both sides of the relationship.

Even with those improvements, that does not mean there is not a role for human rights diplomacy that is more
public at particular times because it is all about maintaining the right level of pressure that, amongst other things, will
help better guarantee that some of the private processes will work. That does not mean standing up on soap boxes and
yelling out angry insults to the Chinese government. However, thoughtful, strongly worded public comments at the
right time, raising concerns about pressing human rights issues, must be part of that overall strategy.

The Chair: Mr. Poloz, would you like to comment?

Mr. Poloz: I like what I am hearing here. Thank you very much, Mr. Chair.

Senator Mahovlich: You mentioned earlier that the population in China is 1.5 billion. Do they have that under
control now?

Mr. Burton: I believe the Chinese population-control policy has been successful to the extent of preventing a
demographic disaster. In fact, the recent government policy has been to loosen up on the previous policy and allow
parents to have more than one child in many cases. The population of Shanghai was declining, for example, as a result
of the effectiveness of the policy. They are now allowing the possibility of more children.

It is one of the characteristics of an authoritarian regime that they are able to implement a policy that would not be
possible under a democratic regime.

Senator Mahovlich: I know many Canadians go over and adopt Chinese children. Is it because they have two or
three children and want to give up one for adoption?

Mr. Burton: You will find that most of the charming Chinese children blessing the homes of Canadians, who have
not been able to have children of their own, are girls. That is because, under the conditions of the one-child policy, and
because boys look after the parents in their old age and girls are married out, there is quite a problem of abandonment
of girls. The orphanages have many abandoned girls. Those little girls are able to bring joy to the lives of Canadians. It
is a beautiful thing.

Senator Mahovlich: I want to speak about the demonstrations that we are having with the Olympic torch and human
rights. I can see there will be a problem in China with the environment. If we cannot control China and human rights,
how will we ever control them when the environment becomes a big problem?

Mr. Burton: In my view, if China was a more democratic country, they would take their international obligations to
international treaties more seriously. I am concerned that the Chinese government may not be as open and transparent
in its reporting to international treaty organizations as Canada would be, and therefore we would not see the type of
compliance with these necessary obligations that limit a country's sovereignty. I am concerned about that.

The Chinese environmental situation is a cause of growing concern. As an economy rises, countries tend to consume
more energy, which leads to more pollution. China is on the rise, and the pollution is increasing.

Senator Mahovlich: I was over there in 1988, and there were a lot of bicycles. I hear there are not as many bicycles
anymore.

Mr. Burton: I agree. You do not see as many bikes, and, for a bicyclist such as me, it is a more dangerous place to
bicycle than it used to be because there are fewer of us on the road.

I went to university in China, and pretty much all of my classmates are now recent owners of automobiles, where
before they were cyclists.

Mr. Neve: With respect to a whole variety of social issues in China, concerns about the environment and human
rights tend to have an important interplay in that individuals — few and far between, but growing numbers — in China
who seek to raise some of those issues, seek to spark a debate or greater public awareness of some of those
environmental issues and challenges face repression. Again, policy for the Canadian government and others must focus
in on protecting and supporting the work of those individuals — activists, leaders, lawyers — who are trying to ensure
these pressing concerns are understood and addressed within China.

Senator Mahovlich: It sounds to me like they have a nice club over there, and it will be hard to get a democracy.

Mr. Burton: That is a good way to put it. I believe Mr. Neve is referring to the fact that Chinese law presently does
not allow for a civil society. Most non-government organizations are illegal.

If one was a citizen activist concerned about the environment and wanted to organize friends to raise awareness of
this issue, in China, one could be subject to arrest and imprisonment for not registering the organization. The criteria
for registration of a non-governmental organization are such that pretty much most of the organizations existing in
China are under the leadership of the Chinese Communist Party.

Senator Mahovlich: Mr. Poloz, several years ago, I was in Moscow. I used to favour a hotel owned by Canadians,
which had a Canadian chef. After I was home, I picked up the paper one day and read that someone had booted the
Canadians out of there. The Russians took it over. How did that end up? Did your association or government agency
iron all that out? I think the investors were from the East Coast. Are you aware of that hotel?

Mr. Poloz: Yes, we are all aware of the case. I am not familiar with the underlying details about how it ended up. I
believe it is solved, but I have not got the details; I am sorry.

Senator Johnson: I am curious to know what each of you think about the will of the Chinese to work with us in the
West on these issues we were discussing, mainly the business side of life. We are cautious in Canada about our
involvement in business in other parts of the world. We have to rev that up and get traction.

In human rights, often many of us in this part of the world do not give credence to the history of other cultures and
do not understand them well enough. In the global economy, this is the Asian century. It is almost as if it has gone full
circle back to Marco Polo.

From their side, what are they saying? Do you think there is the will I just mentioned? We cannot do it without
people wanting to do this, and that includes the Chinese working with us. Because they have so much going for them,
do they really have to work with us anymore? Is that side of it an issue?

Mr. Burton: Partially related to what Senator Prud'homme said, the Chinese do not want to be in a position where
they are seen as taking advice from foreigners. Their perception of human rights is that it is something that originates
in the West and is imposed on them through the leverage of the stronger West against the weaker China. One would be
concerned about the future.

China signed the UN International Covenant on Economic, Social and Cultural Rights in 1997 and ratified it in
1998. In 1998, they signed the UN International Covenant on Civil and Political Rights, but up to now their National
People's Congress has not ratified it. Ten years ago, I felt encouraged that maybe they were thinking that human rights
would be the right thing for them. As the years go by, I am wondering when that day will come.

In terms of these other matters, the Chinese will ultimately act in what they perceive as their own national interest. It
seems that increasingly, particularly with this problem over the Olympics, they are seeing us as a more hostile force
toward China. That could lead to them becoming more inward-looking and going their own way, as you say. That
would be bad news for the international community and international cooperation. China is an important player, and
we would like it to be joining with the rest in a cooperative relationship, not one that is confrontational.

Mr. Neve: I would echo some of what Mr. Burton said earlier, that with this government in China, the prospects of
meaningful change are quite unlikely. It is a fairly disheartening prospect. The Olympic Games are a good example of
how much credence we gave to the rhetoric that came out of Beijing in 2000, when the Olympic Games were awarded
to China, that these games would actually be good for human rights. Everyone had their own view about that, but
eight years later, it is pretty clear that it was rhetoric.

Having said that, though, there are all sorts of — I think I used the word ``flicker'' earlier — flickers of hope here
and there from within China. That is where our attention must go. It is important to maintain pressure, dialogue,
engagement, exchanges and all sorts of things from outside China, but it is from within China — and that is with
respect to any country, but China particularly so — that real change will come. That is where I come back to some of
the things I have said at a number of junctures about the early emergence of a human rights community within the
country, an indigenous local human rights community approaching these issues from a Chinese perspective, using
universal international values in that work. That is very encouraging.

There have been signs of movement on a few important human rights issues, such as the death penalty. That is an
egregiously problematic area in China. We are starting to see improvement; last year the Chinese government
reinstated a higher court review of death sentences, for instance. It appears that the use of the death sentence is starting
to come down as a result. It is still higher than in the rest of the world combined, but there is some improvement. It is
important that there has been pressure from outside of China highlighting concerns about the death penalty, but what
really became interesting was that a debate began within China itself about the death penalty. There is no question that
that is where the hope lies and that is where we need to be looking for many of our policy ideas, and how we can
support and nurture that domestic development.

Mr. Poloz: It may not surprise you to learn that I am a big believer in the power of economics. Economics usually
wins over politics eventually. My finding is that the will among business people is actually quite high. The new,
younger bureaucratic class, which is highly educated and often Western-educated, has a great deal of dialogue there
that is mutually reinforcing. We all know China is big exporter. China is a huge trader, the workshop of the world.
Sixty-five per cent of China's exports are not by Chinese companies but by multinational companies operating in
China.

Obviously, something good is happening there. When we need each other like that, what happens is that we have a
direct reading on what we stand for. That is the transmission mechanism.

Specifically, on the environment, you are absolutely right about where the pressure must come from; it must come
from inside. The environmental awareness in China is far in advance of what our own was at that stage of
development. They do not like the dirty air and water any more than anyone else does. The awareness among business
people is surprisingly high.

Three years ago, EDC took the initiative to have the World Bank's Pollution Prevention and Abatement Handbook
— the PPAH — translated into Mandarin and made it a gift from Canada to a large number of countries. It was
snapped up. They did not have access to that kind of information of global standards. I believe that sort of thing is
working. The glass is may be only half full, but at least half full in that respect, from the business point of view.

The Chair: Certainly, the meeting was not intended mainly to focus on China. There are issues dealing with India
and Russia similar to those we are looking at in China, but we will concentrate on those at another time.

My personal feeling is that I am probably a little more positive than we seem to have indicated in our deliberations
today. Fundamentally, I believe that the Chinese people are honest, hard-working, good people.

I see some bright lights rather than just flickers, Mr. Neve, out there. Yes, the problems exist, but let us not forget
that we also have problems.

As a comment to Mr. Poloz, I do agree that the relationship between China and the rest of the world, and indeed
India or Russia and the rest of the world, is very useful. We live in the age of cyberspace. There is wide communication.
Certainly, the interpersonal relationships can also help to establish a rapport that leads to learning from each other.
That is always useful.

I did not want to leave the meeting with the impression that this is particularly negative. A number of good things
are happening, and I look forward to hearing from many more ladies and gentlemen who will come before us to
educate us and to help us move this topic along.

I want to thank all three of you for doing exactly that. Your contribution has been valuable. We appreciate it and
look forward to seeing you soon.